KILLINGTON/PICO: AZ Challenge 2007 Response/Feedback Thread

[millerm277]

If they can then use the higher profit margin to allow them to make smart investment choices over the next few years, they'll see their skier visits rebound at a higher profit margin than they had in recent years.

As a serious question, what would your suggestion be if they don't turn a profit? Would you bring back what they've cut and lower prices? Or would you cut more and raise prices?

Sometimes you have to go back to the basics and fix the product before you can see it sell well again.

It will sell fantastically if they'd just put some effort to bringing some energy back, and backing it up with what Killington is known for. They've done nothing that excites anyone. (In a good way, there's plenty of anger).

 

[AdironRider]

Theyve done nothing to excite anyone because everyone wants more for less. That aint going to happen. Give it time, let them have a few seasons to make their infastructure improvements, then if it still sucks you can complain. THis whole Killington fiasco is stupid. ASC went under for a reason, you expect the new ownership to provide more, which still charging less? Simple economics should tell you that isnt going to happen.

 

[millerm277]

I don't really want to start all of these arguments again...oh well.

Theyve done nothing to excite anyone because everyone wants more for less.

No, if you look through the posts here and on K-Zone, the price itself isn't the problem. The problem is them charging much more, yet giving us much less. And no, that isn't all that could bring some excitment to the place. Announce some upgrades that will being done in the next couple years, with a timeline for them. That would help a lot....just do something positive, other than say you want to build real estate in a market that's in terrible shape for it as it is.

This whole Killington fiasco is stupid. ASC went under for a reason, you expect the new ownership to provide more, which still charging less? Simple economics should tell you that isnt going to happen.

As we've discussed before, Killington was profitable, ASC as a whole was not, due to massive debt, and owning resorts that lost money (Attitash, and I believe Sugarloaf, along with some of the others they sold before).

 

[AdironRider]

I just dont buy it. Ive followed this whole ordeal since the day it was sold and for the most part theyve told the public what theyre doing and a general plan for the mtn itself. The problems are that noone likes what theyre hearing, as its "increased cost, less service" in their minds. The lifetime passes shouldnt really have been a suprise. Not running a lift 3 days a week (ala skyeship) when the mtn is not crowded, should not be a suprise. Killington has like what 30 lifts? Hate to break it to you, but every other mtn on the east shuts lifts down midweek to save costs. Whiteface rarely runs the freeway lift midweek unless theres racing going on, noone bitches. Its the nature of the resort industry.

Also, Killington seems to have set a general timescale as to their intended improvements, and frankly is following smart business practices but not commiting to certain improvements 5 years down the road. Things change, they havent even operated the place for 1 season yet. They started with what needed to be done, aka base lodge renovations, etc. As they near completion of those they can begin to look into other improvements. This was ASC's downfall, as they planned way to far in advance, expanded way to rapidly, and in turn died.

 

[threecy]

I just dont buy it. Ive followed this whole ordeal since the day it was sold and for the most part theyve told the public what theyre doing and a general plan for the mtn itself. The problems are that noone likes what theyre hearing, as its "increased cost, less service" in their minds. The lifetime passes shouldnt really have been a suprise. Not running a lift 3 days a week (ala skyeship) when the mtn is not crowded, should not be a suprise. Killington has like what 30 lifts? Hate to break it to you, but every other mtn on the east shuts lifts down midweek to save costs. Whiteface rarely runs the freeway lift midweek unless theres racing going on, noone bitches. Its the nature of the resort industry.

Also, Killington seems to have set a general timescale as to their intended improvements, and frankly is following smart business practices but not commiting to certain improvements 5 years down the road. Things change, they havent even operated the place for 1 season yet. They started with what needed to be done, aka base lodge renovations, etc. As they near completion of those they can begin to look into other improvements. This was ASC's downfall, as they planned way to far in advance, expanded way to rapidly, and in turn died.

Bingo

 

[threecy]

As a serious question, what would your suggestion be if they don't turn a profit? Would you bring back what they've cut and lower prices? Or would you cut more and raise prices?

Cut a bit more waste. They're increasing their profit margin by making these unpopular changes, so their variable expenses should be fine. There are still plenty of skiers to take care of the fixed/overhead.

It will sell fantastically if they'd just put some effort to bringing some energy back, and backing it up with what Killington is known for. They've done nothing that excites anyone. (In a good way, there's plenty of anger).

They need to put together a new product. They could very easily have 1M skier visits this year if they wanted to - via aggressive giveaways, discounts, and prices. That does them no good. Cut the waste, fix what you have, get it running efficiently, build it out, then look at trying to set skier visit records. It's not a popular strategy, but I think it has a chance of working out for them.

 

[Highway Star]

Cut a bit more waste. They're increasing their profit margin by making these unpopular changes, so their variable expenses should be fine. There are still plenty of skiers to take care of the fixed/overhead.



They need to put together a new product. They could very easily have 1M skier visits this year if they wanted to - via aggressive giveaways, discounts, and prices. That does them no good. Cut the waste, fix what you have, get it running efficiently, build it out, then look at trying to set skier visit records. It's not a popular strategy, but I think it has a chance of working out for them.

ROFL....what is your ski industry experience again?

Maybe they'll get enough visits........maybe NOT.

Thay are claiming to have a premium, better product than ASC, in some ways, but have cut the season and services........so how is it really better?

How are they so sure they are actually going to increase their yeild per visit? They may not. People may pay the higher ticket prices, but they may also cut back on their optional spending at the mountain....cutting back their spending for lodging, food/bev, gear and instruction.

Run the numbers....do you know how??? With the 150 day season, their announced lift/terrain operating schedule, and goals of reducing Saturday crowding, it is highly likely they will only see 500K visits this year. That's not even taking into account all the negative pubicity. There's no way they could get 1,000,000 visits....only if they went to something like a $30 day ticket....ROFL.

It cost around $40 Million to run Killington in the '05/'06 season. That's before admin expenses (around ~$8m). That was also with a yield per visit of ~$73, on ~800k visits for ~$58M revenue. The operating profit that year was a bit over $8M.

500k visits at that yield is around $36.5M.....you see a problem here? They sure as hell better be able to actually increase their overall yield, combined with a pretty major cut in expenses, if they want to ACTUALLY turn a profit. Can they drive the yield to over $100 per visit??? Maybe, but somehow I doubt it....that means they sell lots of full price tickets and then tag plenty of people of for extras. But what about people who buy a $650 blackout pass, and ski 20-30 days, at ~$25 a day? Or people who bought a $1000 pass and ski 40 days? Nobody, I MEAN NOBODY, drops $1,000 for a Killington pass and only skis 15 days....as much as POWDR may wish it.

Realisticly, I think they be lucky to hit $85 per visit, maybe $90. Lets say $90. With 500,000 visits, they'll see $45M in revenue. POWDR wants to see a ~30%+ operating profit.....or roughly $15M.....that gives them enough to pay their debts to the bank, pay SP Land a cut, pay their admins/execs in Utah, and then a chunk left over for capital investment in Killington....somewhere to the tune of $5-$10 Million....but don't hold your breath for $10 Million.....ROFL.

Anyway, that only gives them around $30M to play with for running the resort, including admin. Hence, all the layoffs, cutbacks and closures. Lets say they spend around $3-4M for admin. The previous target for snowmaking WAS 3,000 acre feet of snow....will they spend the money for that, or cut back to 2,000 or 2,500? Snow ain't cheap....they are going to try to keep the cost per acre foot down in the $1,000 to $2,000 range by only blowing when it's cold out. They are going to groom alot and burn tons of diesel doing so. Lifts cost money to run.....which is why they are closing so many down. We'll also see a skeleton crew of people on the mountain, compared to ASC....they just can't afford it.

Anyway.....who knows. All I can say is that Killington/Pico hasn't been run on a ~$25-30M operations budget for a long, long time....and never in it's current configuration. There will be MANY noticeable changes for the negative. The final straw is that combined with the cutbacks in budget, I think that POWDR simply doesn't have the operational competence to run Killington....it's quite possibly the most complicated resort in the east, if not the country.

 

[BeanoNYC]

ROFL....what is your ski industry experience again?


Run the numbers....do you know how???

You make some good points but unfortunately it's comments like these that discredit you. Perhaps, if you stop being so abrasive, someone will take your more productive comments seriously.

 

[Highway Star]

You make some good points but unfortunately it's comments like these that discredit you. Perhaps, if you stop being so abrasive, someone will take your more productive comments seriously.

Threecry doesn't know what he's talked about...sue me!!!

If you don't like my attitude, you can go jump in a lake!!!!

 

[threecy]

I'm not saying its *realistic* that they'd get 1m skier visits this year, but they certainly could if that was the metric they were going after.

Killington is NOT the first ski area trying to go for a higher profit margin rather than simply just going after skier visits. There are numerous mountains out there who took a significant hit in skier visits in order to improve the value and profitability of their normal priced tickets. Pretty similar response in a few of these too - why are they getting rid of such and such discount/program, why aren't they running such and such lifts all the time anymore, etc. In some instances, this idea worked really well - years later the ski areas would recover the visits via higher margin tickets, etc.

 

[BeanoNYC]

If you don't like my attitude, you can go jump in a lake!!!!

Thanks for proving my point.

:beer:

 

[millerm277]

Killington is NOT the first ski area trying to go for a higher profit margin rather than simply just going after skier visits.

That's true. However, Killington was designed with the goal of getting massive numbers of skier visits, not with making high margins. It's not set-up in a way (and will never be, there's no way to do it), that allows you to cut much without making the experience MUCH worse.

I agree with HS's post completely (other than the insults of course)...and personally, I see a death sprial developing. What's going to happen is that visits are going to fall significantly this year, and keep dropping as other areas make real investments in their resorts. They'll cut more, since they're making much less money (or losing a lot), and more people will leave.....and they cycle will continue until they give up and sell. Also, thanks to the PR disasters so far, the buzz is all negative, and word is continuing to spread, among "normal" people as well.


On another note, Powdr has NEVER operated an eastern resort before. From what they've done so far, I don't think they understand the eastern market and what it requires.

 

[Newpylong]

Theyve done nothing to excite anyone because everyone wants more for less. That aint going to happen. Give it time, let them have a few seasons to make their infastructure improvements, then if it still sucks you can complain. THis whole Killington fiasco is stupid. ASC went under for a reason, you expect the new ownership to provide more, which still charging less? Simple economics should tell you that isnt going to happen.

Huh... They've done nothing to excite anyone because they are doing less for more! ASC went under because of their drunken sailor spending of the 90's, not because of their operation of Killington. The numbers were public, Killington was profitable running as is. It's parent compant was broke, not the mountain. Why does POWDR have to "make money" before they can spend it? That's complete bullshit... the company already has capital, and just by turning the lift's your going to make more... People expected something after dealing with a broke company for so long, instead, now we have a company that isn't broke, that is spending even less, and charging more. Their business model is doomed... You want to survive in the East? Don't create ripples on the water... come in and feel your way through things, spend a little money, create a buzz, get people excited. They've done the opposite, and their neighbors are going to benefit.

 

[threecy]

That's true. However, Killington was designed with the goal of getting massive numbers of skier visits, not with making high margins. It's not set-up in a way (and will never be, there's no way to do it), that allows you to cut much without making the experience MUCH worse.

True, its set up for massive crowds. That said, there are ways to cut back in the short term, reorganize, get the margins up, then move forward.

What's going to happen is that visits are going to fall significantly this year, and keep dropping as other areas make real investments in their resorts. They'll cut more, since they're making much less money (or losing a lot), and more people will leave.....and they cycle will continue until they give up and sell.

I think you're jumping to conclusions...just because they haven't said "we installed 4 HSQs next year and cutting 10 trails the year after that" doesn't mean they're not going to invest in KMart. I really do think these threads will be interesting to read in 5 years.

 

[threecy]

Why does POWDR have to "make money" before they can spend it? That's complete bullshit...

See ASC.

 

[millerm277]

True, its set up for massive crowds. That said, there are ways to cut back in the short term, reorganize, get the margins up, then move forward.

How so? They essentially have to run a minimum of 7 lifts (plus Sunrise, due to the agreement they've got with the condo owners), to allow proper access to all the terrain. As we've already seen with the Skyeship Stage I issue, reducing available terrain midweek is not going to go over well, and cutting other lifts would bring about an even worse response, and would make a significant impact on available terrain.

Superstar is the only lift that could be closed without impacting open terrain significantly, but I can't see them doing that.

I think you're jumping to conclusions...just because they haven't said "we installed 4 HSQs next year and cutting 10 trails the year after that" doesn't mean they're not going to invest in KMart.

I wouldn't expect something like that.

What I expect by next year (and in reality, they could have done or started all of these this summer).

Action on modernizing and improving the snowmaking system.
Action on fixing some of the easy to improve trouble spots. (Eliminate Low Traverse, put a fence, or better yet, some trees to separate Great Northern from Chute/Mouse Trap/Bunny Buster.
I expect to see a timeline/plan for replacing both the Skye Peak Quad, and for the Snowdon lift(s).

Maybe a strategy to figure out how to make early and late season cost less to do, so that they will actually do it.

See ASC.

We weren't expecting to see massive improvements this year. We were just expecting to see more than fixing some of what's broken. Sinking in the amount of money K typically makes would have been a good idea in my opinion (between 8 and 14 million, not 3 million in maintainence).

 

[threecy]

How so? They essentially have to run a minimum of 7 lifts (plus Sunrise, due to the agreement they've got with the condo owners), to allow proper access to all the terrain. As we've already seen with the Skyeship Stage I issue, reducing available terrain midweek is not going to go over well, and cutting other lifts would bring about an even worse response, and would make a significant impact on available terrain.

The season hasn't even begun, so I think it's a bit early to conclude how closing Stage 1 has gone over.

Action on modernizing and improving the snowmaking system.
Action on fixing some of the easy to improve trouble spots. (Eliminate Low Traverse, put a fence, or better yet, some trees to separate Great Northern from Chute/Mouse Trap/Bunny Buster.
I expect to see a timeline/plan for replacing both the Skye Peak Quad, and for the Snowdon lift(s).

They are putting money into the snowmaking system on both mountains. For all we know, they may be waiting on a massive snowmaking investment until they see how a year of 100 fan guns works out at Mt. Snow/Attitash.
Putting in a fence in a trouble spot is something that can be done with a drill and some fencing. In the AZ Challenge, I did see some references to some adjustments to the trail system...it's a bit late in the year to start dropping sapplings into the ground with snowmaking right around the corner.
I think its clear via the AZ Challenge that for now management doesn't want to make plans public - not a bad idea...this industry is filled with plans that either never happen or happen years late at smaller scale. Unless you're part of the ownership, there's no reason they need to tell you what their plan is for the Skye Peak or Snowdon lifts.

We weren't expecting to see massive improvements this year. We were just expecting to see more than fixing some of what's broken. Sinking in the amount of money K typically makes would have been a good idea in my opinion (between 8 and 14 million, not 3 million in maintainence).

This is blunt, but quite frankly they shouldn't care what the 'we' in that statement is expecting to see in terms of what they should invest in their business.

They just dropped a huge sum on buying this property. It makes no sense to drop 8 figures on something that, at least in some people's eyes, has a bunch of fundamental problems that need to be fixed first.

By the way, you said you would not expect something like that in response to my 'install 4 HSQ' statement...that would fit in the upper end of $8-14M investment that you suggest.

 

[Geoff]

They just dropped a huge sum on buying this property. It makes no sense to drop 8 figures on something that, at least in some people's eyes, has a bunch of fundamental problems that need to be fixed first.

Actually, the E2M Partners guys from Texas pretty much stole the resort. They got 75% interest in the buildable land at the bottom from an ASC loan default. ASC was liquidating their portfolio and nobody wanted to buy Killington since ASC had squandered the land that had the real estate profits in the deal. For $75 million, E2M got the remaining 25% of the land plus all the ski resort assets. They then turned around and got POWDR to give them a bunch of cash to buy into the deal. I've heard POWDR has 80% interest in the resort and E2M/SP Land has 20%. POWDR also has some minor interest in the real estate.

So.... it was more like "steal of the century" than "dropped a huge sum". It is disappointing that they're not willing to invest in infrastructure beyond what can only be called routine maintanence.

 

[Lostone]

I think it is their plan to lose money for a number of years. The goal is total customer replacement. They want to market to a clientèle that has money and puts it down. Problem is that those people don't want to ski around the people that (over)populated K-mart in the past.

So they make it bad, so that the former K-mart regulars move on. Then they start to improve things to appeal to a more exclusive customer.

I think their plan is to take the hit until the customer base is gone, then build another one.

ASC's plan to offer rock bottom prices and get everyone to jump didn't work. They're placing their bets differently. Will it work? Stay tuned. But don't look for a change this year or next. I'm guessing it is a five year plan.

 

[millerm277]

The season hasn't even begun, so I think it's a bit early to conclude how closing Stage 1 has gone over.

That decision seems to have tipped the entire town firmly against KSRP, it's at the point now where K-zone has been mentioned by the Killington Selectboard as a reliable source of information because Powdr is so terrible as informing anyone of anything.

They are putting money into the snowmaking system on both mountains. For all we know, they may be waiting on a massive snowmaking investment until they see how a year of 100 fan guns works out at Mt. Snow/Attitash.

From everything that they've mentioned, they aren't really. They replaced a bunch of pipe, that probably had to be replaced to continue using the system. They also bought a bunch more Low-E guns, which seems good until you look into it. As has been discussed before, the guns they have been purchasing have multiple serious flaws for using at Killington. They have a low output, which means you are going to need more of them to make the same amount of snow as the old guns, and since Kmart has no automation, that is going to be even more work for the already way overburdened snowmakers. They also have an incredibly weak throw, so unless it's very calm, they're making as much snow in the glades as they are on the trail.

By major investment, I meant I want to see things fixed completely, and improved where needed this year. I want to see the pipes fixed on all the trails. (Valley Plunge no longer is even listed as having snowmaking, and multiple other trails's snowmaking likely does not work). I want to see them buy some decent snowguns, not necessarily fan guns, but something that is more efficient than the K3000's, yet actually is useful. (Like the Ratnik's and such).

Putting in a fence in a trouble spot is something that can be done with a drill and some fencing. In the AZ Challenge, I did see some references to some adjustments to the trail system...it's a bit late in the year to start dropping sapplings into the ground with snowmaking right around the corner.

That's true, but could have done it at any point all summer, and this is a huge problem, that is well known to anyone that has ever skied Killington.

I think its clear via the AZ Challenge that for now management doesn't want to make plans public - not a bad idea...this industry is filled with plans that either never happen or happen years late at smaller scale. Unless you're part of the ownership, there's no reason they need to tell you what their plan is for the Skye Peak or Snowdon lifts.

Yes, but those plans are what get people interested/excited in the area, and when you aren't actually doing anything significant, divulging some of those plans would be a good idea to keep people interested/excited about the area. (And also, if people actually have something more than a vague suggestion to look forward to, they are much more willing to put up with changes they don't like).

This is blunt, but quite frankly they shouldn't care what the 'we' in that statement is expecting to see in terms of what they should invest in their business.

I disagree. While all skiers aren't going to know what I mentioned there, they do see that nothing major has changed at Killington for the better, and nothing seems to be changing anytime soon, yet they are paying more. (and getting less if skiing weekdays). And, they also see that Killington's competitors have been making lots of good changes.

They just dropped a huge sum on buying this property. It makes no sense to drop 8 figures on something that, at least in some people's eyes, has a bunch of fundamental problems that need to be fixed first.

Are you referring to what Powdr seems to see as fundamental problems in their business model, or as to what the fundamental problems with the mountain are?

By the way, you said you would not expect something like that in response to my 'install 4 HSQ' statement...that would fit in the upper end of $8-14M investment that you suggest.

Hadn't even thought of that. I guess K's traditional profit would pay for 4 HSQ's, makes ASC's spending there seem a lot less ridiculous. It also shows how going for massive numbers of skiers, and having a long season seems to have resulted in a very healthy profit for the area.......